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DIRECTV to Streamline Expenses - Analyst Blog

DIRECTV (DTV) , the largest satellite TV operator in the U.S. has decided to slash its expenses, mainly on hiring and programming in 2012, as a precaution for any economic slowdown. Management is doubtful about domestic economic growth in 2012 due to precipitous sovereign debt crisis in the European region, which is generating severe fluctuations in the global economy and next-year Presidential election in the U.S. Nevertheless, DIRECTV affirmed that its investments in strategic initiatives such as TV Everywhere project will remain intact.

In the previous quarter, DIRECTV generated a significant 327,000 net subscriber addition in the U.S. However, this was primarily attributable to its promotional package of NFL (National Football League) Sunday Ticket. The company offered one-year free NFL ticket subscription for all its new customers, who opted for its two-year video contract. DIRECTV is bearing an estimated cost of $1 billion a year to broadcast this package. As a result, the company's bottom line suffered in the previous quarter.

Pay-TV operators are facing serious threat from online video streaming service providers, such as Netflix Inc. ( NFLX ), Hulu.com, YouTube, and Amazon.com Inc. ( AMZN ) to name a few. These online videos provide an extremely cheaper source of TV programming unless the customer is very eager to see real time programs like sports events. This business model is gaining momentum especially when the economy is under recessionary condition.

In a strategic decision, DIRECTV decided to broadcast its NFL Sunday Ticket TV package on the Internet. The company is trying to expand the viewership coverage of football games through broadcasting it online. Subscribers can now watch NFL matches via Sony Corp. 's ( SNE ) PlayStation 3 videogame console, laptops/PCs, and other high-end mobile devices such as Apple Inc. 's ( AAPL ) iPhone.

Furthermore, management has decided to offer bundled-channel networks excluding the sports channels to reduce cable TV bills of its customers. Therefore, the subscribers have the liberty to choose selective channels for which they can pay less at the same time save money.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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